Getting Started with Subject-To Investing: Finding the “Right” Motivated Sellers
While many people understand the basics of subject-to investing, they may not really have a very good idea of how to get started on the process. Subject-to investing is actually pretty simple in concept, but many new real estate investors – or just investors new to the process – can easily get bogged down because this is not necessarily the simplest type of real estate investing to implement. For this reason, we will take a little bit of time to go over the basics of how to actually get started with subject-to investing.
When you are looking for a house that is ideal for a subject-to deal, you are definitely looking for a motivated seller. After all, someone who does not need to sell their house pretty seriously is not going to be particularly interested in handing over their mortgage and their credit score to a total stranger (though by the end of this process, you will not really be strangers anymore). However, there are still some good signs that you can look for in order to spot a good potential subject-to lead.
These may be owned by people who can afford to wait to sell, but who may be nearing the end of the time that they are willing to wait. If a home has changed agents and listings several times, this can also be a good sign that while the owners are still in the home, they are getting nervous and may be in trouble.
• Look for properties that show signs of moderate neglect.
You have probably heard a lot about real estate investors making a fortune on abandoned properties. Those properties are not the ones you want. If it is abandoned, then it is likely already in foreclosure, may have other legal issues and is unlikely to have a mortgage that is salvageable or intact. However, a home that shows small signs of neglect – peeling paint, unmown lawn or falling-down accessories like fences and walls – can indicate owners that are too busy, tired or stressed out to deal with the “extras” that come with home care.
• Look for FSBOs (for sale by owner)
Any home that is for sale by owner is a decent lead that can easily be followed up on without too much time investment. If the owner is actually trying to sell, they will be easy to reach, and a quick conversation will usually give you a pretty good idea of how important it is to that property owner to sell fast. If it turns out that they are in a hurry, then you may have found yourself a deal.
When you are looking for subject-to deals, just remember that you cannot buy subject-to a mortgage that no longer exists, although you can bring a mortgage current if the numbers are right.
Author Info
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.
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The key reason why some firms thrive while some implode during an financial recession is still a puzzle to many people business-owning business owners. Some wrongly assume that all businesses should suffer via recessionary cycles. But the truth is that some companies are usually essentially recession-proof, and it is not necessarily because they are much larger, better known, or a lot more generously capitalized.
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A subject-to transaction is a real estate deal in which the buyer purchases the property subject to the existing mortgage. This means that they assume the current payments at the current interest rates and their payments, present and future, are subject to the terms of the loan. This is an extremely useful and valuable tool to have in your real estate investing arsenal, particularly in the current market when traditional lender-financing is hard to come by.
As we’ve already discussed, part of successful long-term real estate investing is having an effective way to get out of the investment – preferably while generating wealth at the same time. Sometimes, however, you need to get out of a long-term real estate investment fast, which can create trouble for a real estate investor who only planned for a calm, prolonged exit that could happen at their leisure.
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